ECB Executive Board member Fabio Panetta stated that surging bond yields will dampen the region's economy, though they do not yet pose a critical problem. In his remarks, he noted that these shifts in debt markets are a global phenomenon, led by the United States over the past week, where economic growth and inflation have exceeded expectations.
"The issue is that high interest rates in the US are accompanied by stronger growth, while Europe's growth is relatively weak," he said on Wednesday. "This is not a crisis, but it does act as a drag on growth." Panetta joined other ECB officials in cautioning that tightening financial conditions could restrict economic expansion, though this slowdown might also help curb inflation, which has nearly doubled its target due to soaring energy costs.
Panetta also said that Germany has seen smaller yield increases thanks to its more solid public finances. He specifically pointed to France's persistently high public debt and budget deficit, and noted that sovereign debt tensions could affect Italy's borrowing costs.
"When long-term US rates rise, we see spillover effects on other markets, including Europe," Panetta said. "This also impacts Italy's financing costs."
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